​Oil needs to stay at $40 to curb US shale boom – Goldman Sachs

Oil prices hit new lows on Monday as Goldman Sachs halved its forecast for 2015 to $42 a barrel. The bank says low prices could curtail a number of shale projects, mostly in the US, cutting oversupply, and contributing to further price stabilization.

Goldman reduced its six
month WTI predictions to $39 a barrel from $75, and for 12
monthsto
$65from $80 ,
while its estimate for Brent for the six month period were cut to
$43 from $85, and for 12 months from $90 to $75, according to the
report.

The bank suggests reserves will increase in the second half of
the year, as the market can run a surplus longer than previously
thought due to excess storage, said Goldman analysts to
Bloomberg.

The bank believes oil at $40 should help cut excess supply,
primarily in the US that has been pumping oil at a record pace,
largely due to the Eagle Ford shale formation in Texas, and the
Bakken field in North Dakota.

“To keep all capital sidelined and curtail investment in
shale until the market has re-balanced, we believe prices need to
stay lower for longer,” Goldman said in a report. “The
search for a new equilibrium in oil markets continues.”

On Sunday, WBH Energy LP, a private Texas-based drilling group,
became the first shale company to file for bankruptcy protection
saying their bank was no longer willing to advance money. The
company estimates its debt at between $10-50 million.

Although the countries seem to have realized the importance of
bringing together their efforts, Saudi billionaire businessman
Prince Al-Waleed bin Talal believes no attempts will be made to
bring the oil price back to $100.

“If some supply is taken off the market, and there's some
growth in demand, prices may go up. But I'm sure we're never
going to see $100 anymore. I said a year ago, the price of oil
above $100 is artificial. It's not correct,” he told USA
Today.